Find out how to go about dissolving a nonprofit corporation in your state.

Need to close down your Idaho nonprofit corporation? Here’s a quick overview of the main steps to dissolve and wind up a 501(c)(3) nonprofit corporation under Idaho law.

Authorizing Dissolution

Closing
starts with dissolution, and to dissolve your nonprofit, you will need a
resolution to dissolve. The resolution should include a plan of
dissolution that indicates how the nonprofit’s remaining assets will be
distributed after all creditors have been paid. With the resolution and
plan in hand, Idaho law provides for voluntary dissolution as follows:

if your nonprofit has members, by action of the directors followed by a vote or other consent of the members; or

if your nonprofit doesn’t have members, by a vote of the directors.

Under
the first method, the board first must approve the resolution including
the plan and then submit it to the members. The members then generally
meet and vote to approve the dissolution. Alternatively, members can
provide written consent for the dissolution.

Under the second
method, it is up to the board alone to approve the resolution and plan.
The default rule is that approval requires a majority vote of the
directors in office at the time of approval.

Make sure to properly
record the resolution to dissolve, plan of dissolution, directors’
votes, and, where necessary, members’ votes or written consents. You’ll
need this information for filings with the state and the IRS.

Articles of Dissolution

After
your board (and, where applicable, voting members) have approved the
dissolution, you’ll need to submit articles of dissolution to the
Secretary of State (SOS). The articles of dissolution must contain:

the name of your nonprofit

the date dissolution was authorized

a statement that dissolution was approved by a sufficient vote of the board

if
approval by members was not required, a statement to that effect and a
statement that dissolution was approved by a sufficient vote of the
board of directors

if approval by members was required, (a) the
designation and number of members of, and number of votes entitled to be
cast by, each class entitled to vote on dissolution; and (b) either the
total number of votes cast for and against dissolution by each class or
the total number of undisputed votes cast for dissolution by each class
and a statement that the number cast for dissolution was sufficient for
approval by that class; and

if approval of dissolution by
someone other than the members or the board of directors was required, a
statement that the approval was obtained.

A blank form for
the articles of dissolution (Form 205) is available for download from
the SOS website. The form includes instructions. There is a minimum $30
filing fee.

Winding Up

After your nonprofit
has formally authorized dissolution, it continues to exist only for the
purpose of taking care of certain final matters that, collectively, are
known as “winding up” the company. Winding up is largely about paying
off any debts and then distributing any remaining assets, but there may
also be other tasks involved.

Generally speaking, you can only
distribute money and property after you have paid off all of your
nonprofit’s debts. Then, for asset distributions, there are specific
rules you need to follow. For example, your nonprofit must return any
items that were loaned to it on the condition that they would be
returned upon dissolution. In addition, after paying off debts and
returning loaned assets, a dissolving 501(c)(3) organization must
distribute its remaining assets for tax-exempt purposes. In practice,
this usually means distributing assets to one or more other 501(c)(3)
organizations. Other requirements for distributions, possibly contained
in your articles of incorporation, bylaws, or plan of dissolution, may
also apply. If you have any questions, you should consult with a lawyer.

Notice to Creditors and Other Claimants

One
other part of winding up your dissolved nonprofit involves giving
notice to creditors and other claimants. Giving notice is optional.
However, doing so will help limit your liability and also allow you to
more safely make final distributions of remaining assets. You can mail
notice directly to known claimants after dissolution. You can also give
notice to unknown claimants by publishing in a newspaper.

Federal Tax Note

For federal tax purposes, you’ll need to file IRS Form 990 or IRS Form 990-EZ. You must include a completed Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets),
as well as copies of your articles of dissolution, resolution to
dissolve, and plan of dissolution. When completing Form 990 or Form
990-EZ, you’ll need to check the “Terminated” box in the header area on
Page 1 of the return. For additional guidance, check out Every Nonprofit’s Tax Guide, by Stephen Fishman (Nolo), go to the IRS website, or consult with a tax professional.

Additional Information

You can find additional information, such as forms, mailing addresses, phone numbers, and filing fees, on the SOS website.

Be
aware that dissolution will not stop lawsuits started by or against
your nonprofit before dissolution. Moreover, depending on specific
circumstances, new legal actions can still be started by or against your
nonprofit for as long as five years after dissolution.

This
article covers only the most basic steps of voluntary dissolution after
your nonprofit has started doing business. There are many additional,
more specific rules, covering things like:

involuntary dissolution

dissolution before starting operations

dissolution of non-typical nonprofits

what specific items should be contained in a plan of dissolution

giving proper advance notice of member and director meetings

the required number of director or member votes to approve dissolution

how specifically to approve dissolution in writing without a meeting

what needs to be included in notices to creditors; and

how to respond to legal claims after dissolution.

In
addition, your articles of incorporation or bylaws may contain rules
that apply instead of, or along with, state law. You are strongly
encouraged to consult with a lawyer to obtain additional information on
these and other points.

Final Note: Dissolving
and winding up your nonprofit corporation is only one piece of the
process of closing your organization. For further, general guidance on
many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.